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BB&T BB&T
2008 Manufacturing and 2008 Manufacturing and Materials ConferenceMaterials Conference
March 19, 2008March 19, 2008
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Olin RepresentativesOlin Representatives
Joseph D. Rupp Chairman, President & Chief Executive Officer
John E. Fischer Vice President & Chief Financial Officer
John L. McIntosh Vice President & President, Chlor-Alkali Products
Larry P. Kromidas Assistant Treasurer & Director, Investor Relations
[email protected](618) 258 - 3206
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Olin VisionOlin Vision
To be a leading Basic Materials company delivering attractive, sustainable shareholder returns
• Being low cost, high quality producer, and #1 or #2 supplier in the markets we serve
• Providing excellent customer service and advanced technological solutions
• Generating returns above the cost of capital over the economic cycle
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Olin Corporate StrategyOlin Corporate Strategy
1. Build on current leadership positions in Chlor-Alkali and Ammunition
• Improve operating efficiency and profitability• Integrate downstream selectively
2. Allocate resources to the businesses that can create the most value
3. Manage financial resources to satisfy legacy liabilities
Total Return to Shareholders in Top Third of S&P Mid Cap 400Return on Capital Employed Over Cost of Capital Through the Cycle
Olin Corporation Goal: Superior Shareholder Returns
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Impact of Strategic Impact of Strategic ActionsActions
The New OlinThe New Olin• Revenue is lower, but profits are expected to improve
– During last four months of 2007, profit distribution from Pioneer exceeded full year Metals profit distributions
– Gross Margin as a percent of Sales has improved about 100%
• Overall net debt position has improved• On-going investment in working capital reduced• Volatility of investment in working capital has been
significantly reduced• Defined benefit pension plan expense of $44 million in
2006 and $34 million in 2007 will be income in 2008
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• Be the preferred supplier to merchant chlor alkali customers in addition to being the low cost producer
• Goal is to increase the value of the Chlor Alkali Division to Olin through:– Optimizing capacity utilization– Higher margin downstream products– Cost reduction and financial discipline
Olin’s Chlor Alkali Olin’s Chlor Alkali StrategyStrategy
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Pioneer AcquisitionPioneer Acquisition• Synergistic, bolt-on acquisition that enhances our chlor-
alkali franchise:– #3 chlor-alkali producer in North America
– #1 chlor-alkali merchant producer in North America
– #1 in industrial bleach in North America
– Enhances geographic coverage
• Provides the opportunity for low-cost expansion in the largest chlorine consuming region in North America
• Immediately accretive to earnings and remains highly accretive throughout the cycle
• The Olin balance sheet remains strong
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Pioneer AcquisitionPioneer Acquisition(Continued)(Continued)
• Purchase price of $426 million• $5 million of synergies realized in Q4, expect to realize
$20 million annual run rate by the end of Q2 2008, ahead of original schedule, and $35 million annually thereafter
• Synergies will come from logistics, purchasing, operations and SG&A expenses
• Announced closure of 36,000 short-ton Dalhousie plant expected to save Olin $8 to $10 million annually
• St. Gabriel expansion/conversion expected to:– Increase capacity by 49,000 tons– Reduce annual energy costs by approximately $20 million– Reduce salt cost of approximately $10 million annually with
conversion to a brine system
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Pioneer’s Acquisition moves Olin up to #3 Producer and…Chlorine Capacities
Source: CMAI/Olin
0
1,000
2,000
3,000
4,000
5,000
Dow Occidental Olin* PPG Formosa GGC Bayer AG Mexichem
Ch
lori
ne
Cap
acit
y (-
000
sho
rt t
on
s)
Diaphragm Membrane Mercury Other
4,780
3,484
1,955 1,856
880
471 430371
* Includes St.Gabriel expansion and Dalhousie shutdown
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…Enhances Olin’s Operational and Geographical Platform
32
49 55
25
26
57
18
60
8
29
2
53
30
35
43
38
39
445441
50
59
28
17
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Pioneer Chlorine Plants
Pioneer Bleach Plants
Source: /Olin
Tacoma, WA
Tracy, CA
Santa Fe Springs, CA
Henderson, NV
St. Gabriel, LA
McIntosh, AL
Augusta, GA
Charleston, TN
Niagara Falls, NY
Becancour, Quebec
Olin Chlorine & Bleach Plants
1,955 Total
108Augusta, GA
152Henderson, NV
160McIntosh, AL (50% Sunbelt)
246St. Gabriel, LA (2)
248Charleston, TN
286Niagara Falls, NY
340Becancour, Quebec (1)
415McIntosh, AL
Chlorine Capacity
(-000 Short Tons)
Location
1,955 Total
108Augusta, GA
152Henderson, NV
160Sunbelt)
246St. Gabriel, LA (2)
248Charleston, TN
286Niagara Falls, NY
340Becancour, Quebec (1)
415
Chlorine Capacity
(-000 Short Tons)
Location
(1) Pioneer’s Becancour Plant has 275,000 short tons diaphragm and 65,000 short tons membrane capacity
(2) Pioneer’s St. Gabriel plant includes the announced 49,000 short tons capacity expansion and conversion to membrane cell
Plant Locations
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ECU Netback Outlook ECU Netback Outlook
• Natural Gas prices and capacity reductions have created a more favorable long-term price outlook
• $1 change in Natural Gas MMBTU increases the cost of Natural Gas-based producers by $25 to $35/ECU
• Weaker US dollar and higher transportation costs have significantly reduced imports
• A $10 ECU change equals a $17 million change in pretax income at full capacity or $0.15/share at a 35% tax rate
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ECU Netback Outlook ECU Netback Outlook (continued)(continued)
• First quarter caustic price announcements totaling $80 per ECU are supported by tight caustic supply
• Higher ECU netbacks are driven by caustic pricing:
2005 2006 2007 2007 Caustic Netback Netback Netback Announcements
Q1 $485 $590 $500 $40 Com’l/$50 High GradeQ2 $505 $560 $510 $50Q3 $515 $540 $540 $30Q4 $545 $520 $555 $75
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Capacity RationalizationCapacity RationalizationNorth America Chlor Alkali CapacityNorth America Chlor Alkali Capacity
Reductions Reductions 2000 Through 20052000 Through 2005North America Chlor Alkali CapacityNorth America Chlor Alkali Capacity
Expansions Expansions 2000 Through 20052000 Through 2005
Company LocationShort Tons as
Chlorine
Dow Plaquemine, LA 375,000
Oxy Vinyls LP Deer Park, TX 395,000
Formosa Plastics Baton Rouge, LA 201,000
Pioneer Tacoma, WA 214,000
Atofina Portland, OR 187,000
La Roche Gramercy, LA 198,000
OXY Delaware City, DE 145,000
Holtra Chem Orrington, ME 80,000
Holtra Chem Acme, NC 66,000
Cedar Chem
Georgia Pacific
Vicksburg, MS
(3 locations)
40,000
24,000
Oremet Albany, OR 5,000
Total Reductions 1,930,000
Source: Olin Data
Reductions 1,930,000Expansions (382,000)Net Reductions 1,548,000
Company Location Short Tons as
Chlorine
Vulcan C-A Geismer, LA 210,000
Westlake Calvert City, KY 80,000
SunBelt McIntosh, AL 70,000
Oxy Various Sites 22,000
Total Expansions 382,000
Annual demand growth at 0.8%/Yr = 110,000 Short Tons/Yr
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Announced Capacity ChangesAnnounced Capacity Changes2006 through 20102006 through 2010
North America Chlor Alkali CapacityNorth America Chlor Alkali CapacityAnnounced ReductionsAnnounced Reductions
North America Chlor Alkali CapacityNorth America Chlor Alkali CapacityAnnounced ExpansionsAnnounced Expansions
Company Location
Short Tons as
Chlorine
Dow (completed)
Dow (2011)
Ft. Saskatchewan
Freeport, TX
526,000
450,000
St. Anne Chem (completed)
Nackawic, NB 8
Olin (KOH Conv) (completed)
Charleston, TN 110,000
Oxy (KOH Conv) (2008)
Taft, LA 213,000
Olin (2008) Dalhousie, NB 36,000
Olin (2009) St. Gabriel, LA 197,000
PPG (completed) Lake Charles, LA 280,000
Total Reductions 1,812,008
Reductions (1,812,008)Expansions 2,057,010Net Expansions 245,002
Company Location
Short Tons as
Chlorine
AV Nackawic (completed)
Nackawic, NB 10
Equachlor (completed)
Longview, WA 88,000
PPG (completed) Lake Charles, LA 280,000
Olin (2009) St. Gabriel, LA 246,000
Westlake (2010) Geismar, LA 350,000
Shintech (2008/2009) Plaquemine, LA 543,000
Shintech (2010) Chocolate Bayou, TX 550,000
Total Expansions 2,057,010
Annual demand growth at 0.8%/Yr = 110,000 Short Tons
There is speculation as to whetherthe plant will be built.
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Chlor-Alkali’s Two TierChlor-Alkali’s Two TierIndustrial Bleach Growth Industrial Bleach Growth
StrategyStrategy• Organic Growth
– Bleach expansions began at Olin’s four existing chlor-alkali sites prior to Pioneer acquisition and have been completed
• Acquisitions and Investments– Pioneer purchase increases bleach capacity by 145 million
gallons or 95,000 ECU’s annually and adds multiple locations on the U.S. west coast and Canada
– Investment in 11/2007 – in a limited liability company that owns a bleach and related chlor alkali products manufacturing facility
• Total Olin bleach capacity for 2008 is in excess of 250 million gallons or 160,000 equivalent ECU’s
• Bleach commands a $100 to $200 price premium over ECU selling prices
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Winchester’s Winchester’s StrategyStrategy
• Leverage existing strengths– Seek new opportunities to leverage the
legendary Winchester® brand name– Investments that maintain Winchester as the
retail brand of choice and lower costs
• Focus on product line growth– Continue to develop new product offerings
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Winchester ProductsWinchester ProductsProductsProducts End UsesEnd Uses
Winchester ® sporting ammunition -- shot-shell, small caliber centerfire & rimfire ammunition
Hunters & recreational shooters, law enforcement agencies
Small caliber military ammunition
Infantry and mounted weapons
Industrial products -- 8 gauge loads & powder-actuated tool loads
Maintenance applications in power & concrete industries, powder-actuated tools in construction industry
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WinchesterWinchester• Eleven price increases announced since beginning of
2004 to offset higher metal prices• Latest 5% to 20% price increase effective 1/1/2008• Other U.S. manufacturers including, Remington and
ATK, have implemented similar price increases• Continued expansion of military and law enforcement
business now accounts for 25 – 30% of total revenue:– Military awards of approximately $100 million in 2007– FBI awards of $54 million each in 2007 and 2008
• Consistent developer of industry-leading ammunition:– Six consecutive years as “Ammunition of the Year” awarded
by the Shooting Industry Academy of Excellence
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Financial HighlightsFinancial Highlights• Ample liquidity with new five-year lines of credit
totaling $375 million and cash of $333 million• Net proceeds from the sale of the Metals business used
to redeem debt, strengthen balance sheet and provide funds for St. Gabriel expansion
• Pioneer four-month contribution of $29 million includes $5 million of realized synergies
• Pioneer synergy realization of $20 million annual run rate expected by end of Q2 2008, ahead of schedule, confident that $35 million of synergies will be realized
• With tight caustic supply, we expect the announced price increase of $75 to be fully realized in Q1 and Q2 and are optimistic about the recent $80 caustic announcement
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Financial HighlightsFinancial Highlights(continued)(continued)
• Improved Winchester results:– $26.4 million segment earnings are 67% higher than 2006– Best year since 1994
• 2008 environmental charges are expected to be 25% lower than 2007
• Pension expense expected to be $25 million lower in 2008, offset by $6 million of higher 401(k) funding
• Pension plan is now $110 million over-funded• 2008 capital spending is expected to be in the $200 to
$210 million range which includes $120 million for the St. Gabriel project expected to be completed early 2009
• 2008 effective tax rate expected to be 35% - 36%
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Investment RationaleInvestment Rationale• Continued strong performance based on:
– Relatively high ECU prices– Pioneer acquisition – Cost reductions, price increases and increased U.S.
military and law enforcement revenue in Winchester• Strong financial discipline• At recent price levels, common stock dividend yield is
approximately 4.25% • 325th consecutive quarterly common dividend paid on
March 10th
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Forward-Looking Forward-Looking StatementsStatements
This presentation contains estimates of future performance, which are forward-looking statements and actual results could differ materially from those anticipated in the forward-looking statements. Some of the factors that could cause actual results to differ are described in the business and outlook sections of Olin’s Form 10-K for the year ended December 31, 2007 and in Olin’s Fourth Quarter 2007 Earnings Release. These reports are filed with the U.S. Securities and Exchange Commission.